Coronavirus, Kim Jong Un: O2 Wealth Economic Update, April 24, 2020

U.S. and World News

  • iStock-1211588220Some states are moving forward with reopening business and easing restrictions as they attempt to put the economy back on track. Georgia has allowed barber shops, tattoo parlors, hair salons, massage parlors, and gyms to open cautiously, with requirements such as screening of customers, wearing protective gear, and additional cleaning. Governor Brian Kemp of Georgia has faced criticism for opening business prematurely in a state that has lacked sufficient testing. This morning President Trump signed into law a $484 billion coronavirus relief bill that will primarily provide additional funding to small businesses while also providing funding to hospitals and efforts to increase testing. Some larger public companies have been criticized for taking government aid when unnecessary, while other companies such as Neiman Marcus have announced that they would file for bankruptcy protection. President Trump indicated this week the possibility of social distancing guidelines being extended into early summer and Dr. Anthony Fauci stated that the coronavirus will likely return in the fall. Developing a vaccine remains a critical task for the world and health care giants Johnson & Johnson, Pfizer, and Moderna remain optimistic about their efforts.
  • Speculators say that Kim Jong Un’s health is in danger following his absence from a birthday celebration of North Korea’s founding father, Kim Il Sung. It was reported that Kim underwent cardiovascular surgery, leading to rumors about his ill health, while a South Korean newspaper reported that Kim is “currently touring provincial areas with his close aides.” The Kingdom that is known to lack transparency, has admitted this week to having cases of the coronavirus. President Trump stated that he believes the report of Kim Jong Un’s illness is incorrect.

Markets

  • Markets finished the week lower. The S&P 500 lost 1.3% and closed at 2,837. The Dow Jones fell 1.9% and closed at 23,775. Year-to-date, the S&P 500 is down 11.7% and the Dow Jones is down 16.1%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.59%, respectively.
  • The spot price of WTI Crude dropped this week. Prices tumbled 31.8% and closed at $17.08 per barrel. Year to date, Oil prices are down 72.0%.
  • The spot price of Gold spiked 2.6% and closed at $1,726.80 per ounce. Year to date, Gold prices are up 13.8%.

Economic Data

  • Initial jobless claims fell by 810,000 to 4.4 million and the four-week moving average of claims rose by 280,000 to 5.8 million. Claims rose by 379,000 in Florida, 41,000 in West Virginia, and by 31,000 in Texas. Claims fell by 219,000 in New York, 106,000 in Michigan, and by 105,000 in California.
  • Existing home sales fell by 8.5% to a seasonally-adjusted-annualized rate of 5.27 million units versus expectations for a decline of 9.0%
  • Sales of new single-family homes fell by 15.4% to a seasonally-adjusted-annualized rate of 627,000 units versus expectations for a reading of 644,000 units
  • New orders for durable goods fell by 14.4% versus expectations for a decline of 12.0%
  • Durable goods ex-transports fell by 0.2% versus expectations for a decline of 6.5%
  • Core capital goods orders rose by 0.1% versus expectations for a decline of 6.7%
  • Core capital goods shipments fell by 0.2% versus expectations for a decline of 7.0%
  • The University of Michigan’s index of consumer sentiment increased by 0.8 points to 71.8 versus expectations for a reading of 68.0

Fact of the Week

  • The average price of gas in the US today is $1.745, the lowest level since February of 2016. At the beginning of the year, the average price at the pump was $2.57, a decline of 32% this year. The lowest current price at any gas station in the US is $0.75 in Francis Creek, Wisconsin. (Source: GasBuddy)

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Economy, Markets: Special Wealth Update, Apr. 24, 2020

virus-1154815984_370In an effort to serve our colleagues, Old Second Wealth Management would like to inform you about several of the recent developments that have taken place since our last update:

The CDC began the discussion of reopening the country by releasing a set of guidelines for a phased-in approach. The guidelines put the power in the hands of Governors to begin to allow businesses and activities in their state (or specific counties) to progressively open back up should virus cases and hospitalizations decrease over two week periods. Restrictions become more and more relaxed as states move on to the next phase following two week periods of declining figures. The State of Illinois extended its stay-at-home order through May 30th and the data is showing that Illinois remains at least a few weeks away from beginning this progression toward re-opening.

Due to the success of the first round of funds provided by the Paycheck Protection Program (PPP) in the Cares Act, it was apparent that an additional round would be needed. In response, an additional $484 billion of stimulus has been finalized by Congress and signed by President Trump today. The legislation is focused on boosting aid to small businesses by increasing the funding authority of the PPP by $310 billion, nearly doubling the initial amount authorized. The new bill contains provisions allocating $60 billion for loans originated by community banks and credit unions. Also included are additional funding for reimbursements for hospitals and expanded COVID-19 testing.

Another event that garnered a lot of headlines was ahead of the expiration of May futures contract on WTI Crude oil, trading down to -$37/barrel before closing at $10/bbl. A confluence of factors including a glut of oil production, plummeting demand due to reduced travel and a severe shortage of remaining storage, created a scenario where it could be more economical for oil producers to PAY buyers to take delivery of the oil in May instead of storing oil for future delivery. The current WTI Oil contract is currently at $17/bbl with future contracts for July delivery trading near $21/bbl indicating uncertainty around the speed at which the economy may be back up and running.

Uncertainty remains high and volatility as measured by the VIX index continues to trade at elevated levels but equity markets have rallied over 25% off of their mid-March lows and fixed income markets have stabilized with credit spreads contracting. This reflects the fiscal and monetary policy measures that have been taken and the apparent willingness to do more if needed. It’s also likely a response to some of the positive advances on the health side of the equation. While our background is in finance and not healthcare we are cautiously encouraged by some of the potential developments in testing, treatments and ultimately a vaccine. Pharmaceutical companies and health agencies around the world are solely focused on the COVID-19 problem and we are optimistic we can conquer this disease someday soon.

As always, if you have any questions or concerns, please do not hesitate to reach out to your Relationship Manager or Investment Officer.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Saudi Arabia: O2 Wealth Economic Update, April 17, 2020

U.S. and World News

  • virus-1206428318_370The total number of confirmed COVID-19 cases worldwide is now over 2.1 million, 671,000 of which is in the United States. The curve has been flattening in the United States, prompting discussions among government officials regarding ways by which to open the economy. On Thursday evening, the Trump administration set out guidelines for individual states to open their economies in a series of phases. Before entering the first phase, the number of cases or reports of COVID-19 and flu-like symptoms need to show a downward trend over a two-week period. Also released Thursday evening, was a report that said Gilead Sciences drug Remdesivir was showing some effectiveness in treating patients suffering from coronavirus, giving many a sense of optimism. Lawmakers will negotiate throughout the weekend toward an emergency bill that would expand the Small Business Administration loan plan which reached its cap of $350 billion this week.
  • Saudi Arabia and its allies declared a unilateral cease-fire in the war in Yemen this week, triggered by fears that the coronavirus would spread in Yemen, the poorest country in the Middle East. At least 150 members of the Saudi royal family have contracted the coronavirus including the governor of Riyadh, who is currently in intensive care. Yemen has yet to publically announce a case of COVID-19 in the country, where an outbreak could be very difficult to contain. It is believed that this historic decision by Saudi Arabia will eventually lead to an end of the war that has lasted half a decade.

Markets

  • Markets continued to rise higher this week. The S&P 500 rose 3.1% and closed at 2,875. The Dow Jones spiked 2.2% and closed at 24,242. Year-to-date, the S&P 500 is down 10.5% and the Dow Jones is down 14.5%.
  • Yields fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.65%, respectively.
  • The spot price of WTI Crude fell further this week. Prices fell 20.3% and closed at $18.13 per barrel. Year to date, Oil prices are down 70.3%.
  • The spot price of Gold fell by 0.7% and closed at $1,684.93 per ounce. Year to date, Gold prices are up 11.1%.

Economic Data

  • Initial jobless claims fell to 5.2 million and the four-week moving average of claims rose by 1.2 million to 5.5 million. Claims rose 33,000 in North Carolina, 18,000 in Indiana, 10,000 in South Carolina, and 7,000 in Florida. Claims fell by 422,000 in California, 167,000 in Michigan, and 115,000 in Georgia.
  • The level of housing starts fell 22.3% (1.2 million units) versus expectations for a decline of 18.7% (1.3 million units)
  • Building permits fell by 6.8%, versus expectations for a decline of 10.7%
  • The Philadelphia Fed manufacturing index fell by 43.9 points to -56.6 versus expectations for a reading of -32.0
  • Industrial production fell by 5.4% versus expectation for a decline of 4.0%
  • Retail sales fell by 8.7% versus expectations for a decline of 8.0%
  • Core retail sales rose by 1.7% versus expectations for a decline of 2.0%
  • Import prices fell by 2.3% versus expectations for a decline of 3.2%
  • Import prices ex-petroleum fell by 0.1% versus expectations for a decline of 0.2%

Fact of the Week

  • The $1,200 per person stimulus payment created in the CARES Act (paid to individuals making less than $75,000 and couples making less than $150,000) is available to non-citizen immigrants working legally in the United States on H-1B and H-2A visas (source: CARES Act).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Oil, OPEC: O2 Wealth Economic Update, April 10, 2020

U.S. and World News

  • nurse-1210132646_370New York State now has over 160,000 confirmed cases of coronavirus, more than any other country in the world, as Governor Cuomo continues to plea for government support, asking for ventilators, masks, and other respiratory equipment to help slow the spread. The United States now has over 466,000 confirmed cases as the virus has spread from big cities to rural America and global confirmed cases have topped 1.6 million, over 100,000 of them deadly. Despite the large numbers, the curve is flattening in New York with regards to new confirmed cases. On Thursday morning, the Federal Reserve announced $2.3 trillion of additional financing for small businesses and state governments. Congress will attempt to pass additional aid for small businesses next week after an additional $250 billion failed to pass this week, as Senate Democrats were seeking more funding for hospitals and states. Dr. Anthony Fauci stated that the U.S. death toll from the coronavirus could be closer to 60,000, instead of his prediction last week that there would be 100,000 to 240,000 deaths.
  • At the conclusion of a long virtual OPEC+ meeting, the energy alliance of oil producers agreed to a historic 10 million barrel per day production cut which equates to 10% of global supply. The price of WTI crude had been trading 12% higher following the meeting, before falling 9% late at night after Mexico announced its opposition to the production cuts. This means that the production cuts will not take place until OPEC+ reaches an agreement with Mexico. Oil producing nations have urged the United States to cut production to help stop the falling prices, but have failed to reach any agreement. The Texas Railroad Commission, which has to authority to mandate production cuts in the state, will meet next week to discuss the possibility of reducing production.

Markets

  • Markets surged in the best week since 1974. The S&P 500 jumped 12.1% and closed at 2,790. The Dow Jones spiked 12.7% and closed at 23,719. Year-to-date, the S&P 500 is down 13.2% and the Dow Jones is down 16.3%.
  • Yields rose slightly while the curve steepened this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.41% and 0.72%, respectively.
  • The spot price of WTI Crude fell considerably this week. Prices fell 18.2% and closed at $23.19 per barrel. Year to date, Oil prices are down 62%.
  • The spot price of Gold rose by 3.9% and closed at $1,684.04 per ounce. Year to date, Gold prices are up 11%.

Economic Data

  • Initial jobless claims fell by 261,000 to 6.6 million and the four-week moving average of claims rose 1.6 million to 4.3 million. Claims rose by 286,000 in Georgia, 29,000 in New York, and by 28,000 in Michigan.
  • The producer price index (PPI) fell by 0.2% versus expectations for a decline of 0.4%
  • PPI ex- food, energy, and trade services fell by 0.2% versus expectations for a flat reading
  • Wholesale inventories fell by 0.7% versus expectations for a decline of 0.5%
  • The University of Michigan’s index of consumer sentiment fell 18.1 points to 71.0 in the preliminary report, the largest decline on record.
  • The consumer price index (CPI) fell by 0.4% versus expectations for a decline of 0.3% and the year-over-year rate rose by 1.5% versus expectations for an increase of 1.6%
  • Core CPI fell by 0.1% versus expectations for an increase of 0.1% and the year-over-year rate rose by 2.1% versus expectations for an increase of 2.3%

Fact of the Week

  • 68 individual stocks in the S&P 500 index were down at least 50% YTD as of the end of the 1st quarter 2020, including 7 stocks down at least 75% YTD (source: BTN Research).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Oil: O2 Wealth Economic Update, April 3, 2020

U.S. and World News

  • quarantine-1214116696_370President Trump has extended the federal social distancing guidelines to April 30th as the official world number of cases surpasses 1 million. Earlier this week, Dr. Anthony Fauci and top government scientists estimated that the coronavirus could kill 100,000 to 240,000 Americans, as they pledge to do everything that they possibly can to reduce that number. So far, 38 states have instituted some form of stay-at-home orders while Dr. Fauci continues to suggest that all states institute this mandate immediately. New York Governor Andrew Cuomo said this morning that “The curve continues to go up” in New York as they saw their single-largest daily increase in deaths yesterday since the outbreak began. The American economy is at a standstill with businesses shut, roads empty, and citizens in their homes as federal officials are rushing to distribute stimulus checks to taxpayers. Even after the largest emergency spending bill in U.S. history was passed last week, Congress and the Trump administration have begun to discuss details of what “Phase 4” could look like.
  • Russian President Vladimir Putin is prepared to work with Saudi Arabia and other OPEC+ members to cut production and stop the fall in oil prices. Putin stated that production cuts could be as much as 10 million barrels per day. The decision comes after a conversation on Monday between President Trump and Vladimir Putin about the collapse in oil prices. Last month, Saudi Arabia flooded the market with oil, driving prices into the ground after a disagreement with Russia on production cuts to curb the falling demand due to the coronavirus. Putin indicated that Russia would meeting with OPEC+ on April 6th to discuss production cuts.

Markets

  • Markets moved back towards the lows this week. The S&P 500 fell 2.02% and closed at 2,489. The Dow Jones lost 2.64% and closed at 21,053. Year-to-date, the S&P 500 is down 22.48% and the Dow Jones is down 25.62%.
  • Yields were relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.39% and 0.61%, respectively.
  • The spot price of WTI Crude rebounded sharply this week. Prices jumped 32.31% and closed at $28.46 per barrel. Year to date, Oil prices are down 53.39%.
  • The spot price of Gold fell by 0.42% and closed at $1,621.38 per ounce. Year to date, Gold prices are up 6.86%.

Economic Data

  • Initial jobless claims rose by 3.3 million to 6.6 million and the four-week moving average of claims rose 1.6 million to 2.6 million. Claims rose by 721,000 in California, 286,000 in New York, and by 257,000 in Michigan.
  • Pending home sales rose by 2.4% versus expectations for a decline of 1.8%
  • The Conference Board index of consumer confidence fell by 10.7 points to 120.0 versus expectations for a reading of 110.0
  • Private sector employment in the ADP fell by 27,000 versus expectations for a decline of 150,000
  • The ISM manufacturing index fell 1.0 points to 49.1 versus expectations for a reading of 44.5 points
  • The ISM non-manufacturing index fell 4.8 points to 52.5 versus expectations for a reading of 43.0
  • Construction spending fell by 1.3% versus expectations for an increase of 0.6%
  • Factory orders were flat versus expectations for an increase of 0.2%
  • Nonfarm payrolls fell 701,000 versus expectations for a decline of 100,000
  • The unemployment rate rose 0.9% to 4.4% versus expectations for a reading of 3.8%
  • Average hourly earnings rose 0.4% versus expectations for an increase of 0.2% and the year-over-year rate rose by 3.1%

Fact of the Week

  • Saudi Arabia’s cost of producing a barrel of oil is $9, the lowest in the world. The cost of producing a barrel of shale oil in the United States is $23 (source: Rystad Energy).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.